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Apple sends an invitation: 'See you on the 7th'

On Wednesday September 7, Apple invited the media to an event in which it is expected to launch a series of new products including:

iPhone 7 - The iPhone 7 will drop the headphone jack, include a new home button with haptic feedback, and look lot like the 6S. There has also been talk of an iPhone 7 Pro that will apparently sit above these two devices. It's thought to have better photo-taking capabilities - like a dual-camera setup - and more. The market expects a completely redesigned iPhone to come out in 2017.

iOS 10 - Apple always debuts a new iPhone running the latest, major version of its iOS mobile operating system, and this year will likely be no different. The new iOS will sport a number of new features designed to enhance your iPhone even more beyond what the company launched in iOS 9 last year. Claiming to be the biggest update yet, there will be at least 10 major features, including a HomeKit Home app as well as changes to Siri, the lock screen, and photos.

iPad Pro - Apple may choose to announce new iPad models during the same event - maybe even a second-generation 12.9-inch iPad Pro.

MacBook Pro - Rumours suggest new ones are on the way. What's more, the upcoming laptops won't simply have faster processors and thinner bodies, which we all pretty much expect. They are also heavily tipped to feature an OLED touch panel and a Touch ID sensor embedded in their keyboards. AirPods - Russian regulatory trademark filings spotted by mobiltelefon.ru seem to confirm that Apple is readying standalone hardware for its upcoming phones. The filings, which were published by the Eurasian Economic Commission on 29 August, refer to wireless headphones called AirPods.

Our stance on Apple prior to the Media event

We increased our price target on Apple from $94/share to $115/share mainly due to an increase in Price-to-Earnings multiple from 11x to 13x bringing it closer to market expectations as we move closer to the Media event on  September 7, 2016.

We maintain our neutral recommendation on the stock based on our concern that demand for the new iPhone will not be as high as previous years due to increased competition.

Nonetheless, fundamentals of the company remain strong and we are confident holding on to the shares at these levels.

Our thoughts on the $14.5 bln Tax Penalty

The European Union antitrust regulator has concluded that Apple was granted undue tax benefits of up to $14.5 billion by Ireland. Although at first it might sound like a hefty price to pay, Apple currently has more than $210 billion in offshore cash which could be used to finally settle the tax penalty.

Ireland's Finance Minister will seek approval for an appeal; the country has two months and 10 days to appeal. We do not expect this to have a negative impact on the share price until we get further clarity on the situation which could take a long time.

This article was issued by Kristian Camenzuli, Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. 

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